Banks operating in member states of the Gulf Cooperation Council (GCC) need to introduce new mechanisms and resolutions to ensure smooth flow of liquidity, manage credit risks and to fully conform with Basel III requirements, stated Governor of Central Bank of the UAE.

’’It is important for the GCC banking system to introduce new financial tools like Sukuks, securities and treasury bonds so as to address future challenges.

Unlike their European counterparts, the GCC countries have not all these banking tools because they are new to this field,’’ Sultan bin Nasser Al Suwaidi told reporters on the sidelines of the 53rd meeting of the Committee of Governors of Monetary Agencies and Central Banks in the GCC.

Speaking before the meeting in the presence of GCC Secretary General Dr. Abdul Latif Al Zayani, Al Suwaidi, who is also chairman of the current session, affirmed the GCC member states maintain ample liquidity and have the resilience to address challenges ensuing from crises. He ruled out any negative impact the GCC could face as a result of financial woes in the Euro Zone, calling for transparency and sharing of information among banks in the GCC.

He explained that the meeting had discussed an array of issues regarding financial and monetary supervision and control and anti-money laundering.

Turning to UAE banking sector, the UAE central banker described capital adequacy as ’’very good’’ at 11%, above the Basel III benchmarks of 8% for Tier I capital and 2% for Tier II capital.

He added that banks operating in the UAE had posted good results over the first nine months of the current year. According to him, banking loans were projected to rise between 5 and 6% while banking deposits were expected to be over 6%.

’’Banks in GCC countries possess huge funds in regards to Tier I Capital of Basel III (+11% in UAE), however liquidity will remain the daunting challenge before implementing the Basel III,’’ he said.

’’Banks need to adopt a flexible policy on liquidity risk management and to introduce principles of institutional control where a sound percentage of liquidity is kept for survival during crises at all times,’’ he stressed.

’’The global financial crunch has given birth to a new reality which requires a review of credit risks from the angel of available revenues of the borrowers against the size of loans they intend to take,’’ he added.

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